EMU: Retail Sales

Tue Apr 05 04:00:00 CDT 2016

Consensus Actual Previous Revised
Month over Month 0.1% 0.2% 0.4% 0.3%
Year over Year 2.0% 2.4% 2.0%

Retail sales performed much as expected in February. A 0.2 percent monthly rise followed a marginally weaker revised 0.3 percent increase in January and lifted annual workday adjusted growth from 2.0 percent to 2.4 percent. Purchases have now risen for four consecutive months although gains have been typically quite modest.

In fact February's headline advance was wholly attributable to a 0.5 percent bounce in spending on food, drink and tobacco. Excluding auto fuel, non-food demand contracted 0.2 percent, its first decline since last November.

Regionally the overall monthly rise was held in check by Germany (minus 0.4 percent) although this was largely offset by gains in France (0.6 percent) and Spain (0.2 percent). Elsewhere it was the usual mixed bag with solid increases in the likes of Portugal (2.7 percent) and Lithuania (1.1 percent) contrasting with sizeable falls in Estonia (2.2 percent) and Slovenia (1.4 percent).

Average Eurozone volume sales in January/February were 0.8 percent above their average level in the fourth quarter when they advanced just 0.2 percent. Without a significant setback in March retail sales will have made a useful positive contribution to first quarter GDP growth. However, with consumer confidence last month sliding to its weakest level since December 2014, the signs are that households may be becoming more cautious. The ECB will be hoping that its March easing package will translate into a rebound in morale in April and with it, an increased propensity to spend.

Retail sales measure the total receipts at stores that sell durable and nondurable goods.

Retail sales are important indicators of domestic consumer demand and are monitored closely by analysts as an important input to GDP. If you know what consumers are up to, you will have a pretty good idea on where the economy is headed. Needless to say, that's a big advantage for investors. The data are available in both value and volume measures although the press release deals only with volume. In addition to the total, the initial report provides a limited breakdown that separately identifies food, drink and tobacco, and (excluding automotive fuel) non-food products. A more comprehensive dataset is only available with the following month’s release. Unlike the U.S. and Canada, auto sales are not included in the retail sales data.

The pattern in consumer spending is often the foremost influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth.

Retail sales not only give you a sense of the big picture, but also the trends among different types of retailers. Perhaps auto sales are especially strong or apparel sales are showing exceptional weakness. These trends from the retail sales data can help you spot specific investment opportunities, without having to wait for a company's quarterly or annual report.